The Arabian economy mostly consisted of trading people before the advent of Islam.
International trade contributed significantly to that economy. The Arabian peninsula
had quite a number of active trade centres. Trade routes to Abyssinia were from
Hijaz to Palestine, Egypt and then Abyssinia. The ships used to sail from Jeddah
through Bab-ul-Mandab to any of the Abyssinian ports.

Zafar and Suhar were old centres for the sea trade of Indians on the coastal
soils of the Persian Gulf. Zafar was situated to the East of Hadrawat and was a
known market for perfumes. Suhar and Waba were old markets and traders from Sindh,
India, China and other eastern and western countries gathered there to participate
in trade fairs held at these places. Before the dawn of Islam, these areas were
under the jurisdiction of Jalanzi b. Mustakabar who charged a tax from the traders
at the rate of 10 percent. He also hosted trade fairs. Among these fairs were those
of Ukaz, an oasis between Taif and Nakhlah. The fair was held on 1-20 Dhul-Qadah,
the 11th month of lunar (Islamic) calendar.

The direction of external trade of Arabian economy was mainly focused on China
and Abyssinia. The Makkan traders used to take leather, glue and frankincense to
Abyssinia. Woolen cloth and gowns were also exported to Abyssinia and bartered for
food grains. In this way, the pre-Islamic Arabian economy had a lot of international
trade links. A reference to trade caravans of the Quraish has also been made in
the Holy Quran. In one of the chapters (Al-Quraish 106:2) the Quraish are reminded
of the protection God provided to their caravans traveling in summer and winter.

The advent of Islam introduced new motivations and dimensions to the international
trade of the Arabian economy. Muslims were encouraged, individually and collectively,
to seek bounties of God and promote trade.

Islam also provides certain regulations regarding trade and it is compulsory
for the traders doing business within the Muslim territory to abide by those regulations.
According to the Muslim jurists, the following guidelines should be followed by
Muslims traders while conducting their business affairs.

The seller should not praise his goods for the qualities they do not possess.

The seller should disclose the qualities, good or bad of his stock to the prospective
buyer.

A trader should not hide the weight and quantity of his goods.

He should not keep the price a secret in a way that if the buyer comes to know
of it, he will refuse buying.

All this is binding on all Muslims and business whether they are living in one
country or the other. The trade links with the well-known trade centres and trade
fairs in the world also continued during the Islamic era. International trade kept
playing a very important role in the Arabia after Islam. The Muslims established
trade relations with almost all the known countries in the world. They were great
navigators and their ships touched the shores of India, China, Europe and Russia.
Caravan traffic with the ‘Ship of the Desert’ was the common means of traveling
and trade between different Muslims countries especially the pilgrimage caravan
to Makkah.

In Islam, people are divided into two different classes for the purpose of collecting
taxes. There is a world of Muslims called Dar-ul-Islam and the world of foes, Dar-ul-Harb.
So the sources of revenue fall into two distinct categories:

The taxes imposed on Muslims are called zakat and ushr.

The taxes imposed on non-Muslims called Jizya, Kharaj and a tax on non-Muslims
traders called import duty or tariff called ‘ushr’.

As is shown above, in the pre-Islamic days, the Arabs and the neighboring Byzantine
and the Sassanian trade caravans were accustomed to sell their commodities in one
another’s territory. It was customary for the market chiefs to impose duty at the
rate of ten percent on the goods brought for trading by foreign traders in their
territory. This kind of trade levy looks like the present-day customs duty. There
does not appear any sharp distinction between the market toll at octroi posts between
the trade levy on goods imported for sale. The term ‘ushr’ and perhaps ‘maks’ equally
applied to both.

On the system of ‘ushr’, collection on merchandise goods, we have numerous traditions
in which the Holy Prophet (PBUH) condemned it in the severest terms. To quote a
few traditions,

The collector of maks will not enter paradise.

The collector of maks will not be questioned for anything. He will be caught
as such and thrown in the hell fire.

In his agreement with some Arab tribes, when they embraced Islam en mass after
conquest of Makkah, the Holy Prophet (PBUH) decreed that they would no more be subjected
to the payment of ushr which was a common practice. Thus the Jurists generally held
the system of market levy to be a jahili practice which the Holy Prophet (PBUH abolished.
Thus we can say that Islam rejects any customs duties among Muslims countries and
this becomes a plus point in the formation of customs union among the Muslim counties
in which they will be having free trade among themselves. This clearly means that
during the early period of Islam there was no trade toll on the international movement
of commodities. This position is fully reflected in Mawardi’s assertion that nothing
lies on the international movement of trade commodities and that in the Dar- ul-
Islam this kind of levy is unlawful.

As regards the common external tariff, it is reported that during Caliph Umar’s
time the traders complained to the Caliph that the Muslim traders had to pay the
toll of the tenth of their saleable commodities according to the pre-Islamic customs
while selling their merchandise in the non-Muslim territories. In reciprocity Caliph
Umar order the cancellation of the same rate from traders from outside the Muslim
state coming to trade in the Muslim land. However, he also ordered not to impose
any ‘ushr’ (Customs duty) upon a Muslim or on a dhimmi, if the former had paid zakat
and the latter jiziya in accordance with the pact made with them. Ushr was levied
on the people of Harb only when they sought permission to trade in Muslims lands.
ushr collectors were appointed who collected a levy of 10 percent from the Herbi
traders, five percent from the dhimmi traders and two and a half percent from the
Muslim traders.

The rationale behind different rates of the above levy as imposed by Caliph Umar
on different categories of traders was that the rate of 10 percent on Harbi traders
was to reciprocate and to balance the same rate collected from the Muslims traders
in the Herb lands.